Given cost of logistics in India, sector granted infrastructure status

Wednesday, 22 November, 2017, 08 : 00 AM [IST]

Our Bureau, New Delhi

Infrastructure status has been granted to the logistics sector in India. The need for the development of an integrated logistics sector has been felt for quite some time, in view of the fact that the logistics cost in the country is very high compared to developed countries.

High logistics cost reduces the competitiveness of Indian goods, both in the domestic as well as the export market. The development of logistics would give a boost to both the domestic and the external demand, thereby encouraging manufacturing and job creation. This will, in turn, be instrumental in improving the country’s gross domestic product (GDP).

The inclusion of the logistics sector in the Harmonised Master List of Infrastructure Sub-sectors was considered in the 14th Institutional Mechanism (IM) meeting, held recently. It was recommended by the IM and subsequently approved by finance minister Arun Jaitley.

Logistics infrastructure was included by the insertion of a new item in the renamed category of transport and logistics.

There was also a footnote stating that logistics infrastructure meant and included multi-modal logistics parks [comprising inland container depots (ICDs)] with a minimum investment of Rs 50 crore and a minimum area of 10 acre; cold chain facilities with a minimum investment of Rs 15 crore and a minimum area of 20,000sq ft, and/or warehousing facilities with a minimum investment of Rs 25 crore and a minimum area of one lakh sq ft.

It will enable the logistics sector to avail infrastructure lending at easier terms with enhanced limits, access to larger amounts of funds as external commercial borrowings (ECB), have access to longer-tenor funds from insurance companies and pension funds and be eligible to borrow from India Infrastructure Financing Company Limited (IIFCL).